Friends for life: Vietnam insurance demand rises
Friends for life: Vietnam insurance demand rises
Life insurers are gearing up for a busy year ahead as the market for insurance products in Vietnam is expected to boom in the near future.
2018 is slated to be a promising year for foreign life insurers in Vietnam. The life insurance market already grew by 30 per cent in 2017, backed by Vietnam’s stable macro-economics, emergent middle class, and strong consumer demand. Industry insiders expect the same growth rate for this year, which is prompting insurers to up their game right as the business year begins.
AIA Vietnam is one such example. The insurer signed a new bancassurance deal with Viet Capital Bank last week, following a series of partnerships with other lenders such as HSBC, DongA Bank, and VPBank in 2017.
Wayne Besant, CEO of AIA Vietnam, told VIR that bancassurance will be an important distribution channel for the firm, as more Vietnamese open bank accounts and expect more sophisticated services from financial firms.
“We expect to ‘walk on two strong legs’, which means we’ll continue the traditional agency distribution method as well as boost bancassurance partnerships,” said Besant.
The CEO revealed that in 2017, bancassurance was the fastest-growing channel for AIA in Hanoi and Ho Chi Minh City.
It is easy to see that bancassurance will continue to be a buzzword for the industry in 2018. Traditionally, foreign insurers opt for agents, which still account for 90 per cent of new business premiums in Vietnam. However, the sector’s over-reliance on agents, especially general agents without any exclusive ties to any insurer, has caused problems in the agent selection process, staff turnover rates, and quality assurance. This has required life insurers to seek out bancassurance partnerships, in addition to this channel helping the core mission of educating Vietnamese consumers on personal finance.
Insurers hope that as more Vietnamese become acquainted with the concept of life insurance, the insurance market will grow. Room for market expansion is huge, as only 6 per cent of the Vietnamese population currently has an insurance contract, which is among the lowest rates in the Asia-Pacific region.
Larry Madge, CEO of Sun Life Vietnam, believes that Vietnam’s stable interest rates, strong GDP growth, and better financial literacy will bode well for life insurers. “We believe that in 2018, Vietnamese consumers will have stronger demand for tailored products on personal finance,” Madge said.
Similarly, managing director of Manulife Vietnam Paul Nguyen pointed out that Vietnam’s middle class is growing rapidly, which means more people will be willing to use part of their income to invest in retirement or financial protection solutions, including life insurance. The ageing population here will also drive up demand for wellness and retirement products.
Nguyen said that in the next three years, Manulife Vietnam will strive to be “the trusted partner that helps people live positively”. Unlike other insurers who use general agencies, Manulife Vietnam prefers to have a tied agency system in order to control the quality of its agents. Bancassurance will be another focus, with the insurer aiming to build an omnichannel approach with digital services.
“Vietnam is a key part of our Asian goal. Our plan to expand the office network to more cities across the country will help bring us closer to customers and serve them better. We are also investing in key initiatives such as new technology to improve the client experience,” said Nguyen.
